Cash-stuffed Buffs

Foundation shows it's got game with big investment returns

James Paton, Rocky Mountain News

Published January 26, 2007 at midnight

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The University of Colorado's football team flopped, but its fundraising group had a strong year, posting an investment gain that defeated Nebraska, Oklahoma, Texas and other Big 12 rivals.

The CU Foundation, which seeks to maximize donations by putting money to work in stocks, bonds, hedge funds, -real estate, private equity and more, put up a return of 14 percent in the latest fiscal year.

That wasn't enough for a first-place finish. Three schools, Oklahoma State, Baylor University and Texas A&M, fared better.

But it was a positive performance for CU, whose endowment has grown by $217 million in the past five years, relative to competitors in the Big 12 and nationwide.

There's a lot more than bragging rights at stake. Public universities such as Colorado depend on endowments, along with tuition and state funds, to pay the bills, and they've relied on them even more heavily in recent years as state support has declined.

The foundation, thanks to private support, directs a portion of the assets to the university each year to help pay for scholarships, professors and academic programs.

Underscoring the importance of the investment side of the equation, the CU Foundation raised nearly $60 million in donations in the last fiscal year, while the 14 percent investment return generated about $77 million in additional wealth.

Gifts to CU had fallen amid a string of negative headlines involving allegations of sexual misconduct in the football program, inflammatory comments made by professor Ward Churchill and improper practices at the foundation. But donations to the university started to turn around in 2004 and 2005, and in recent months have been on a record pace.

It was an all around solid year for CU investments as well.

A decision in 2004 to begin advancing aggressively into international stocks and private equity has paid off, said Chris Bittman, the foundation's chief investment officer. Other areas in the fund looked good, too.

"Everything did well," Bittman said. "I'm glad we were diversified. With a U.S. only portfolio you wouldn't have seen those type of returns. And I like how we got there, with so much less volatility than the benchmark and the broad domestic stock market."

The median endowment across the country was up 10.8 percent in the year that ended June 30, 2006, the National Association of College and University Business Officers found in a report released earlier this week. That's the most recent national data available.

For endowments between $500 million and $1 billion - Colorado sits in that camp - the median return was 12.8 percent. So CU also outperformed by that measure.

The Standard & Poor's 500 Index was up 8.6 percent for the fiscal year.

Colorado State University saw an 11.3 percent gain in the year.

For the calendar year, the CU Foundation racked up an investment return of about 17 percent, according to Bittman.

Colorado gives chunks of the money to outside specialists. Among the recent funds that have done well are a Capital Guardian emerging markets offering, an MHR Institutional Partners distressed debt portfolio and a GMO international equity fund.

Emerging markets is another category that has delivered big numbers for CU.

Around the Big 12, Oklahoma State was No. 1, racking up a return of 21.7 percent last year. The university surged to the top of the heap with a sizable stake invested in energy funds managed by BP Capital, the outfit founded by OSU graduate and oil tycoon Boone Pickens.

The Sooners, meanwhile, had a lackluster year. The University of Oklahoma Foundation climbed only 8.7 percent in that span.

"We've always had a conservative approach, which cost us last year," according to Ron Winkler, the treasurer. "We're trying to address those issues."

Bittman, a 1985 CU graduate, said he doesn't spend much time worrying about other schools' returns. Each university has a benchmark it aims to defeat.

"It's interesting," he said, referring to the Big 12 returns, "but it's not what drives us."

The officials managing endowment money do not have the same resources or mandates, so comparing them is tough.

Colorado's endowment is nearly four times as big as Colorado State University's, according to the NACUBO, and Harvard's $28.9 billion endowment is nearly 50 times the size of Colorado's.

Harvard, the nation's largest university endowment, reported a fiscal year return of 16.7 percent.

"We get paid to outperform a benchmark and to generate consistent returns for the university," Bittman said. "What Harvard can do with 130 employees differs from what we can do with our three."

patonj@RockyMountainNews.com or 303-954-2544

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